The euro eased on Friday from the seven-week peak it struck after a deal on Europe's debt crisis, with an Italian bond auction showing investors have yet to be convinced the region's problems are on the way to being solved. The single currency was last down 0.2 percent at $1.4157, off the previous day's peak of $1.4248.
Traders reported thin liquidity and said many market players were holding fire after being caught out by the euro's rally. Small offers were said to be starting to build up above $1.4200 and stops at $1.4260, with bids reported back at $1.4120/00. The euro slipped after the auction yield on new 10-year Italian government debt hit a new euro lifetime high. It was the first euro zone bond supply since European leaders struck a deal on anti-crisis measures this week.
Analysts said the euro remains vulnerable as the eurozone still needs to find the money to expand its bailout fund, the European Financial Stability Facility (EFSF). Doubts linger as to whether the fund's increased size of around 1 trillion euros ($1.4 trillion) would be enough to staunch the crisis.
"Although we're getting somewhere with the EFSF, the Italian auction shows the market is sending signals that the crisis hasn't been solved by a long shot," said Stephen Gallo, head of market analysis at Schneider FX. Gallo said the euro's rally could extend to $1.4700 if macro investors jumped on to the near-term trend but outright buying of the common currency was still to materialise.
Against the yen, the dollar was down 0.2 percent at 75.77 yen, but off another all-time low around 75.66 hit on Thursday. The dollar index was last at 75.070, up slightly on the day, having dropped from a peak of over 76 on Thursday. Commodity currencies, among the biggest gainers on Thursday, fell prey to profit-taking. The Australian dollar was down 0.6 percent at $1.0666, having surged on Thursday to $1.0753 from sub-$1.0400 in its biggest one-day rally in 16 months.